4.4.4  Claims

Manual Transmittal

December 16, 2011

Purpose

(1) This transmits revised IRM 4.4.4, AIMS Procedures and Processing Instructions, Claims.

Material Changes

(1) Minor editorial changes have been made throughout this IRM. IRM references were reviewed and updated as necessary.

(2) Instruction that an amount claimed is required for Disposal Code 34 was added to IRM 4.4.4.3.

(3) The requirement to update the claim amount to a value other than $1 was added to IRM 4.4.4.3.1.

(4) The information pertaining to jobber claims was removed from IRM 4.4.4.3.1.2.

(5) A disposal code decision table was added to IRM 4.4.4.4. The different claim disposal code sections found in IRM 4.4.4.4 were deleted.

(6) The disposal code for "agreed claim partially allowed" was changed to "04" from "03" in IRM 4.4.4.4.

(7) References to freeze code "P" were deleted in IRM 4.4.4.5.

(8) The excise tax information contained in IRM 4.4.4.7 through IRM 4.4.4.8 (rev. 02-1999) was moved to IRM 4.24.3, Selection, Assignment and Monitoring of Workload, IRM 4.24.8, Claims for Refund or Abatement, IRM 4.24.11, Excise Tax Processing Procedures at the Cincinnati Internal Revenue Service Center (CIRSC), and IRM 4.24.13, Fuel Compliance Officer Technical Guidance.

Effect on Other Documents

This material supersedes IRM 4.4.4 dated March 1, 2003.

Audience

Large Business and International (LB&I), Small Business/Self Employed (SB/SE), and Wage and Investment (W&I) employees.

Effective Date

(12-16-2011)

Karen M. Schiller
Director, Examination Planning and Delivery
Small Business/Self-Employed

4.4.4.1  (12-16-2011)
Overview/Claims

  1. This section provides instruction for processing claims.

  2. Not every amended return is a claim for refund (claim). Also, a request for abatement is not a claim for refund.

    1. A claim for refund is a request by the taxpayer for a refund on amounts assessed (tax, penalties, and/or interest) that have been fully paid by the taxpayer.

    2. A request for abatement is a request filed by the taxpayer for a decrease in liability, but the abated amounts (taxes, interest, and/or penalties) have not been paid in full.

    3. An amended return represents corrections to a tax return which can either be a tax overassessment (taxpayer is due a refund) or underassessment (taxpayer owes additional funds).

  3. A claim is either a "formal" or "informal" request.

    1. Formal claims are filed on any of the forms listed in IRM 4.10.8.9, Claims.

    2. An "informal claim" is a request for a refund submitted by the taxpayer either on a non-standard form (written request) or by some other means as long as the required claim elements are identified. See IRM 4.10.8.9.

      Note:

      A claim for abatement is not an informal claim. The abatement amounts have not been paid by the taxpayer.

  4. See IRM 4.13.4, Area Office (AO) Examination, if a claim is filed due to a prior examination.

4.4.4.1.1  (12-16-2011)
Determine Source Code

  1. See IRM Exhibit 4.4.1-19 for the definition of all source codes. The following paragraphs provide additional guidance for amended returns:

  2. If research shows the original return has never been examined, and the requested refund has not been paid by the campus, then use Source Code 30.

    Note:

    A Transaction Code (TC) 30X present on the transcript indicates the return has been examined. The presence of a TC 29X should not be considered an examination of the return.

  3. If research shows the original return was previously examined and is still on AIMS in status 90, then reopen the AIMS record and retain the original source code and add Aging Reason Code 53. If research shows the original return was previously examined and the controls are not currently on AIMS, then use Source Code 73 and add Aging Reason Code 53.

  4. The module balance has no bearing on which source code to use.

4.4.4.2  (12-16-2011)
Source Code 30

  1. Source Code 30 requires a claim amount be present on AIMS and ERCS.

  2. Source Code 30 includes amended taxableForm 1041, U.S. Income Tax Return for Estates and Trusts,Form 1065, U.S. Return of Partnership Income, and Form 1120S, U.S. Income Tax Return for an S Corporation.

  3. Source Code 30 does not include audit reconsideration cases or amended nontaxableForm 1041, Form 1065, and Form 1120S. See IRM Exhibit 4.4.1-19 for more information.

4.4.4.2.1  (02-08-1999)
Invalid Source Code 30

  1. Returns that are incorrectly assigned Source Code 30 may be surveyed without scheduling an overassessment by using Command Code AMAXUE to correct the source code and remove the amount claimed from the data base.

4.4.4.3  (12-16-2011)
Claim Amount

  1. Ensure the amount claimed is placed on AIMS when required.

    Note:

    Nontaxable amended returns should not have an amount claimed.

  2. If the correct amount of claim is not on the data base (determine by looking at Form 5546, Examination Return Charge-Out Sheet, or an AMDIS(A) display), then use Form 5348, AIMS/ERCS Update (Examination Update), to update AIMS with the correct amount. The corrected amount can also be entered on Form 5344, Examination Closing Record, when the case is being closed, or Form 5349, Examination Correction Request, after the case has been closed.

  3. If the correct amount is on the data base, then no entry is required on Form 5344 when the case is being closed unless the claim is being surveyed with a DC 34.

  4. If an amount claimed was put on the data base in error, and it has been determined that a claim does not exist and the claim will not be examined or surveyed (Disposal Code 34), then only Disposal Codes 29 and 33 are valid. If you want to use any other disposal code, then delete the claim amount.

4.4.4.3.1  (12-16-2011)
Computing the Amount Claimed

  1. The amount claimed is the specific amount of refund requested.

  2. If the taxpayer has filed for "the entire amount of tax paid," the amount claimed is the amount of tax shown on the return.

  3. If the taxpayer has filed for "$1 or more" or "such amount as may be due," then the amount claimed is the amount the examiner has computed and recorded on the final notice to the taxpayer as the amount of claim. This notice will be in the form of a claim allowance, partial allowance, or disallowance. The $1 must be replaced with the correct amount of the claim as soon as the amount becomes evident. The amount must be changed before the case is closed from the group.

4.4.4.3.1.1  (12-16-2011)
Application for Tentative Carryback

  1. Form 1045, Application for Tentative Refund, and Form 1139, Corporation Application for Tentative Refund, are not treated as claims when the amount requested has been refunded; even though, a claim form with the same issue and tax period was filed at the same time.

  2. Occasionally, a taxpayer will file a second claim for an additional operating loss allowance. If the taxpayer’s return is open in Examination, the refund is not made and the second claim is associated with the return, then enter the amount of the second claim.

4.4.4.3.1.2  (12-16-2011)
Multiple Claims for the Same Tax Year

  1. When several claims are made for different issues the amount of claim entered is the net amount of all the issues.

  2. Multiple claims involving one employment tax return, Form 941, Employer's Quarterly Federal Tax Return, of the same employer, are treated as one claim and the total amount claimed is entered.

  3. When several claims are filed for the same issues, or if one claim has additional issues, enter the larger amount.

4.4.4.3.1.3  (02-08-1999)
Multiple Tax Years

  1. Claims that cover longer than one tax period must be recomputed so that an amount for each tax period is entered.

4.4.4.3.1.4  (02-08-1999)
Surveyed Claims

  1. Enter the amount allowable as a refund rather than the amount claimed on surveyed claims.

4.4.4.4  (12-16-2011)
Disposal Codes

  1. Claims for refund, request for abatements, and audit reconsiderations will use a variety of disposal codes depending on the situation.

  2. Refer to IRM Exhibit 4.4.1-11 for disposal codes for amended returns, claims, and tentative refunds that have been paid by the campus, flow-through entities, and other situations not described below.

    Disposal Claim for Refund Request for Abatement Audit Reconsideration
          New Opening Reopened
    Fully Allowed 03 03 03 Original DC
    Partially Disallowed - Agreed 04 04 04 Original DC
    Partially Disallowed - Unagreed 08 08 08 Original DC
    Fully Disallowed - Agreed 01 01 01 Original DC
    Fully Disallowed - Unagreed 01 01 01 Original DC
    Protests to Appeals 07 07 07 07
    Surveyed 34 34 See IRM 4.4.1-11 Original DC

    Note:

    Form 5344 Item 41 is required with DC 01.

4.4.4.5  (02-08-1999)
Informal and Carryback/Carryforward Claims

  1. When the campus receives informal and carryback/carry-forward claims, they are hand carried to Accounts Management un-processed and without posting a TC 977 to establish an amended return freeze. If there is an open Examination control, Accounts Management will forward these claims to the Examination Branch at the campus with the print of the AMDISA display attached reflecting the open control. This is so that actions can be taken to prevent premature closing of the open case until claims are associated.

  2. Claims received in the Examination Branch for cases under its control will be associated immediately upon receipt.

  3. Claims received for association with area controlled cases will be handled as outlined in the remainder of this section.

4.4.4.5.1  (12-16-2011)
Informal Claim

  1. Input an "O" ("OH" , not zero) freeze on AIMS to prevent the case from being closed.

  2. Attach a buckslip to the claim with instructions to release the freeze code once the claim has been associated with the return.

4.4.4.5.2  (12-16-2011)
Carryback Claim (excess investment credit, net operating loss, etc.)

  1. Forward the claims to the appropriate area office group or function for association with the open return.

4.4.4.5.3  (12-16-2011)
Category A (pre-refund) Claims with Carryback Issues

  1. The procedures for Carryback Claim, IRM 4.4.4.5.2, also apply when Category A (pre refund) claims involving carryback issues are selected by the Examination Branch at the campus for area examination.

4.4.4.6  (02-08-1999)
Claim of Right Case

  1. Claim of right cases are rarely seen in the area office.

  2. A claim of right occurs when, under the provisions of IRC 1341, a taxpayer includes an item in gross income for a prior taxable year (or years), but it was later determined the taxpayer did not have an unrestricted right to that item of income.

  3. The taxpayer takes the deduction in the year in which the determination was made, but the amount of the tax decrease is based on the tax for the prior taxable year which would result solely from the exclusion of the item. For this reason, the decrease in tax is taken as a credit against tax and can be more than the total tax liability on the account. The proper way to apply the credit is to reduce tax. If there is any excess, it is applied as a miscellaneous credit.

4.4.4.6.1  (12-16-2011)
Group Procedures

  1. Attach Form 3198, Special Handling Notice for Examination Case Processing, to the front of the case file. Add notation "Claim of Right Case."

  2. Consult Technical Services when there are questions on these cases.

4.4.4.6.2  (12-16-2011)
Closing Function Procedures

  1. Determine the total tax assessed from a transcript.

    IF the total tax assessed is THEN
    sufficient to allow the total recommended overassessment, use TC 301 to reduce the tax on the module.
    not sufficient to allow the total recommended overassessment,
    1. use TC 301 to reduce the tax on the module to zero, or

    2. use reference numbers 766 or 767 to allow the additional credits needed to process the overassessment.


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